The middle ground: stablecoins

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So far, we know crypto is highly volatile, as was proved these past days, when Bitcoin price fell after an announcement by Tesla (see plot below, created using Cryptowatch and Twitter ) This is a mayor drawback for some crypto users, who which to have the stability of fiat with the possibilities of crypto.


 

Back in 2010, someone reportedly paid 10,000 Bitcoin for 2 pizzas… today (16 May 2021) means he paid about 350 million pound for the pizzas. This is a reason why many will choose to buy crypto but don’t spend it, because, what if in the future worths millions? So, if you want to have cryptocurrency knowing that its value will be stable (like fiat), then you may want a stablecoin.

 

Stablecoins are a type of cryptocurrencies that have their value linked to an external asset, like dollar or gold, to stabilise its value. Stablecoins have a 1:1 equivalence to some fiat. Most stablecoins are related to USD, meaning they represent (and cost) USD $1.

 

On the site CoinMarketCap you can find the stablecoins with the highest capitalisation, thus more reliable. Here are some of them:


  • Tether (USDT): one of the most well known. It’s backed in reserves from traditional assets. Widely used for daily transactions, and exchanged for other currencies. It has a sibling token called Tether Gold (XAUt) which is backed by gold reserves.

  • DAI (DAI): is the preferred by Ethereum users, as it allows you to run Dapps, but also to exchange for coins based on ETH (the so called ERC20)

  • Binance USD (BUSD): Binance, being one of the largest crypto exchanges, has its own stablecoin.

Now, you might be asking: why would I want a cryptocurrency that has the same value as a dollar? Because sometimes you need an asset that is not volatile and, at the same time, not subject to the same problems as regular money. Think about a country with high inflation. Every day the fiat (regular money) is losing its value, and every day items become more and more expensive. In this case, a stablecoin becomes a good option. On the one side, because it’s a cryptocurrency, it will not get devaluated by inflation. On the other side, because is a stablecoin, its value will be stable, and not subject to the volatility of most cryptocurrencies.

 

As other cryptocurrencies, you can get them from most of the exchanges. Kraken has a good selection of the most used stablecoins, although you can also check other reliable platforms (e.g., Binance, Coinbase, Gemini)










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